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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: I’m getting ready to buy my first home and wondering how long things will take during the process. Can you explain some basic timelines I should be aware of?

Answer: Timelines vary by regional markets quite a bit due to different customs, contract structure, or local/state governance. Below, I’ll offer a quick answer to common timeline questions I get as it relates to real estate in the greater D.C. Metro area.

How long does it take to close/settle on a home after an offer is accepted?

  • The median contract-to-close period in Arlington has been ~30 days since 2018, down from ~36-38 days a decade ago. Most sellers want to close as quickly as possible, so buyers who can close faster have an advantage. Be sure to talk to your lender about how long they need to close before signing off on your offer. Some bigger, national banks and credit unions often need 35-40+ days to close. Many of our local lenders can comfortably close in as little as three weeks (sometimes even faster).

How long does a seller (or buyer) have to respond to an offer/counteroffer?

  • Our contracts do not stipulate a response deadline so any deadline for a response must be written into the contract or otherwise communicated by the party who wishes to set a deadline. Technically, an offer/counteroffer can go on forever if it is never responded to or withdrawn.

When is the Earnest Money Deposit (EMD) due?

  • It is common for the EMD (usually 1-3% or more of the sale price) to be due to the EMD holder (usually the Title Co.) within 3-5 days of going under contract. With such a quick turn-around for a substantial amount of cash, make sure those funds are in an account that you can quickly and easily transfer (wire or check) money out of. For a reminder on what the EMD is, here’s an article I wrote earlier this year.

How long do you have to complete a home inspection and decide whether or not to move forward with the purchase?

  • The game has changed lately for home inspections, which I wrote about earlier this year, but for buyers who can secure a post-contract inspection contingency, they usually have as little as two days to as many as ten days from going under contract to complete the home inspection and decide whether or not to move forward or submit their requests for repair or credit. The timing and type of inspection contingency are all negotiable terms and factor heavily into the strength of offer.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Will I see more homes being listed for sale in the fall, or is there a steady drop in sales activity until next year?

Answer: It is completely normal for the market to slow down (pace of listing activity and contract activity) during the summer, but it was discussed much more this year because the preceding months were so crazy, locally and nationally, and everybody is on high alert to a potential bubble.

Nothing I have seen so far has suggested that the change in market conditions over the last couple months is anything more than normal seasonal behavior, so I expect the next couple months to lead to similar seasonal patterns as in years past (except for 2020).

This means a quick bump in post-Labor Day listing activity and contract activity, followed by a steady drop in both measures through the end of the year.

The chart below shows monthly listing and contract activity as a percentage of total annual activity for Arlington from 2015 to 2019, broken out by single-family homes (SFH)/townhouses (TH) and apartment-style condos/coops. The following bullets are some highlights I pulled from the data:

  • The September bump in listing activity only lasts for a couple of weeks before starting a steady decline through the end of the year.
  • The SFH/TH and condo markets behave similarly, but the changes in condo activity aren’t as extreme as the SFH/TH market. The spring peaks and summer lull are closer to average for condos, meaning seasonality plays less of a role in the condo market than the SFH/TH market.
  • The bump in post-Labor Day SFH/TH contract activity outlasts the short, but more extreme, burst in listing activity
  • From October to December, contract activity actually exceeds new listing volume, but this generally does not lead to better sales results during this time of year
  • The four months from March to June account for nearly 46% and 43% of annual SFH/TH and condo listing volume, respectively, and almost 44% and 40% of annual SFH/TH and condo contract activity, respectively.

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Do you recommend staging for vacant homes?

Answer: When you stage a home, you are placing temporary furniture and accessories in a home while it is being marketed for sale. In most cases, I strongly encourage staging a home instead of leaving it empty.

The value of staging shows up in two critical parts of the selling/marketing process. It improves the quality of the photos by helping people understand the scale and purpose of a room. Better photos lead to more showings. Good staging also improves the way Buyers experience the home in-person during a showing. Better showings lead to better/more offers.

Great staging helped buyers make sense of an otherwise large, open space at 3196 N. Pollard Street.

In my opinion, the three main benefits to staging a home are:

  1. Add life to empty homes: Walking into an empty house can be eerie and makes a home feel lifeless. Those are not feelings you want potential buyers to have while walking through your home. Good staging can add energy and life to a vacant home.
  2. Help rooms feel larger: This is counterintuitive, but most people perceive empty rooms as being smaller than they really are. I’ve experienced this on numerous occasions walking through empty rooms with buyers who have trouble understanding how a bed or couch can fit into an empty room that is more than big enough for their furniture.
  3. Engage the eye: Well-staged properties keep buyers engaged with room layout and functionality, but unstaged, empty rooms allow buyers to focus on flaws like paint scuffs, separating trim, poor lighting and other things you’d prefer buyers to overlook during their visit.

You do not need to stage every room. In a larger townhouse or single-family home, that can get unnecessarily expensive. Prioritize the most important rooms like the living room, dining room and primary bedrooms for the best return on investment. Accessorizing walls, countertops and shelves also adds a lot of value.

Don’t forget about staging for outdoor spaces like this patio at 4645 4th Road N.

Good staging isn’t cheap, often ranging from about $2,000 to $10,00+ depending on the size of a home and type of staging furniture, but it should be looked at as an investment like anything else you do to prepare your home for sale like painting, cleaning and landscaping. As a rule of thumb, I think investing .25-.5% of the market value of a home generates a clear, strong return.

Cheap, thoughtless staging provides little or no value at all. Sticking a chair or two in the living room or simply laying a blow-up bed on the floor of a bedroom are not the same and provide little, if any, benefit.

If you intend on living in your home or leaving your existing furniture for the sale (photos and showings), consider “occupied” staging, whereby you hire a stager to help you maximize the use of your existing furniture and accessories. Just promise not to get offended if they recommend removing your favorite lime green shag carpet. ☺

This sale used mostly furniture and accessories from the owner, with some add-ons from the stager, in a great example of a successful occupied staging approach at 1276 N. Wayne Street #1230.

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Do you have an update on the smoking ban bill you wrote about earlier this year?

Answer: Virginia House Bill 1842 was signed into law by Governor Northam on March 18, 2021, and became effective July 1, 2021. The bill has major implications for owners of condominium and property owners associations (condo and POA) by giving the association’s elected board the ability to ban smoking inside homes and on private balconies by way of a new resolution to the rules and regulations, which generally requires a simple majority vote of the board.

Prior to this, boards could ban smoking in common areas this way, but smoking bans within units/homes required a lengthy (multiple years), costly and resource-intensive effort to get a 2/3+ vote from owners to change the bylaws.

I spoke with attorney Michael C. Gartner, a partner at Whiteford, Taylor, & Preston LLP and current president of the Community Associations Institute (CAI) Washington Metro Chapter, about the new law to make sure I was clear on the implications this has for Virginia condos and POA communities.

Mr. Gartner confirmed that the new law, effective July 1, 2021, does in fact allow condo and POA boards to ban smoking inside private residences with a simple majority vote of the board. He also offered some helpful advice and caveats for any boards/communities who plan to move forward with in-unit smoking bans:

  • In rare cases, some bylaws may specifically restrict a board’s ability to make certain rule changes or require something other than a simple majority, so boards should have an attorney review their bylaws prior to proceeding with a smoking ban.
  • Smoking bans should be written as a compliant resolution through legal counsel, not as a simple motion.
  • Enforcement is always a challenge for boards (noise, trash and other common rules always present enforcement challenges), and boards may want to work with their legal counsel to establish compliant enforcement protocol.
  • The new law includes a provision that allows owners to call a special meeting to vote and repeal a change in the smoking policy.
  • Smoking ban policies might flip back and forth as new boards are elected and the majority votes for a new/different smoking policy than the previous board.

I’m not aware of any other state that has passed legislation like this (please comment if you know of other similar laws) in the rest of the country, which is amazing, considering Virginia’s political and economic history, that we may be the first state with this type of law.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Is the housing market slowing down?

Answer: Over the past two to three months I’ve experienced a noticeable slowdown in the single-family and townhouse market relative to what we’ve experienced most of the last 12+ months. While slower than it has been, the market is still very competitive, and prices are holding.

Properties that would have gotten eight to 10 (or more) offers a few months ago might get two to three now. Escalations over asking are still common but less extreme. And in some cases, buyers can secure modest contingencies (inspection, appraisal, financing). I believe the main factors in this change are:

  • Buyers have distractions they didn’t have for much of the lockdown (vacations, events, commutes, etc.)
  • Asking prices are more reflective of market values now that six-plus months of closed sales in 2021 are available for market pricing analysis
  • Some buyers have given up after months of struggling to find/win a home
  • Normal seasonal behavior. Demand usually subsides in the summer, relative to the previous spring.

Home Demand Index Readings

To put the receding demand into perspective, I pulled out some charts from the most recent Bright MLS Home Demand Index, which tracks regional and local demand by analyzing data ranging from buyer showing activity to closed sales to feedback from local real estate agents.

Demand in the overall Washington D.C. metro housing market dropped 17% from June to July and 13% year-over-year. The July 2021 Demand Index reading of 123 is lower than the Demand Index reading in 10 of the last 14 months, with the four months from November 2020 to February 2021 being the only months with lower readings since May 2020. July 2021 is also the first month with a year-over-year decline in demand over the last 12+ months.

The Index uses the same price ranges to track demand across all Bright MLS market centers (D.C., Baltimore, Philadelphia) so the price ranges aren’t the best for the D.C. metro/Arlington area but still provide a good indication of regional and local demand trends.

The Demand Index for single-family homes ranging from $395K to $950K dropped 19% from June to July and 9% year-over-year. For single-family homes over $950K, the Demand Index dropped 29% from June to July and just 2% year-over-year.

While these reports show significant drops in demand recently, the actual demand is still very high and is enough to support recent price appreciation.

Listing Volume Still High

The number of condos listed for sale over the past 12 months is significantly higher than any other 12-month period we’ve seen in Arlington, but July listing volume settled down to finish closer to historical averages than we’ve been seeing. This is a sign that the surge in condo supply may be tapering off while we’re also seeing condo demand increase relative to the second half of 2020 and early 2021.

High market values and changing housing needs have also led to an increase in the number of single-family homes listed for sale in Arlington lately, but that volume is much closer to the historical average than what we’ve witnessed in the condo market. It also does not seem like it to most buyers because demand has quickly absorbed the extra supply.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: How much more do new construction homes sell for compared to similar homes that were recently built?

Answer: Roughly 100 new construction single-family homes have sold each year in Arlington since 2015 (per BRIGHT MLS). The cost of a new home shot up in 2018 and again in 2020 and 2021, but the size, layout, features and design of the homes have remained mostly consistent.

Arlington new construction sales since 2015

Now that we’re seeing more resales of recently built homes, I thought I’d take a look at how the price of new construction homes compares to similar homes built in the past five to six years. To do this, I looked at the 2021 sales of new construction homes vs. the 2021 resales of homes built from 2015-2019 in the 22207 ZIP code (by far the highest volume of new/newer home sales in Arlington). I also removed a few outlier sales so we have a more accurate comparison.

New construction at 3196 Pollard Street, Arlington, VA, 22207 ($2.3 million)

New construction homes sold in 2021 sold for 16.9% more than similar 2021 resales of recently built homes (built between 2015 and 2019); however, new construction homes were an average of 22% bigger (based on total finished square feet) than 2015 to 2019 builds sold in 2021.

As a result, new construction homes actually sold for a lower price per square foot on both above grade (not including the basement) and total finished calculations. Thus, one could argue that new construction, with its lower price per square foot and brand new systems (HVAC, appliances, roof, windows, floors, etc.), is a better value… but it’ll cost you a lot more in dollars to get there.

It’s also worth noting that while you get brand new systems in new construction, a resale has (hopefully) already gone through the initial pains of breaking in the house and the inevitable issues that come up for owners of new construction. You may also find that the first owners have invested in some improvements that a builder may not have, such as upgrading exterior living spaces or landscaping.

New construction vs. resale of recent construction

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Do homes sold on-market sell for more than homes sold off-market?

Answer: I want to start by saying that I know that this column comes off as being a shameless/salesy pitch for Realtors, but those of you who have followed my columns over the years hopefully recognize that I focus on informative, data-driven articles and steer clear of using this platform for sales pitches for myself or my industry.

With that said, I’m sharing this recent study of off-market vs. on-market sales released by BRIGHT MLS because I think that they did a good job solving for the right answers in the data (not just favorable answers) using a massive sample size, filtering out the right data and using a number of different cross-sections to confirm the findings within more specific datasets.

Study Overview

You can download and read the full study if you’re interested. The study included nearly 443,000 sales in 2019 and 2020 in the three BRIGHT MLS Metropolitan Statistical Areas (MSA) of greater Washington D.C., Baltimore and Philadelphia markets. The researchers compared about 116,000 off-market sales (using public records data) to about 327,000 comparable on-market sales.

What is On-Market vs. Off-Market?

An on-market sale is a sale that is listed and marketed on the BRIGHT MLS platform, which provides mass syndication/distribution to the 95,000 real estate agents in the BRIGHT network (includes Virginia, Maryland, D.C., Pennsylvania, Delaware and West Virginia), brokerage websites and most third-party consumer-facing sites (e.g. Zillow).

An off-market sale is one that is not listed on the BRIGHT platform and either sold without any online marketing or only placed on a brokerage and/or third-party website for marketing. Off-market sales can take many forms but are ultimately defined by the lack of market exposure via the BRIGHT platform.

Results Favor Selling On-Market

Across the entire dataset, homes that were sold on-market sold for 16.98% more, based on the median price of comparable sales. Here’s a screenshot from the study showing the cross-section of the Washington D.C. MSA (extends all the way into West Virginia).

I’d like for this study to report on more cross-sections of the market and include larger and smaller homes, different price points, condo vs. single-family and more because I think it’s all really valuable data to help consumers make decisions about the sale of their home. There are certainly scenarios where sellers might benefit from an off-market sale or where an off-market sale makes sense for reasons beyond a seller’s bottom line, but having as much data as possible to help people make educated decisions is key.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: How has Arlington’s condo market performed in the first half of 2021?

Answer: Given the tremendous appreciation we’ve seen locally and nationally on prices for single-family homes and townhouses, the mostly unchanged values of condos in Arlington highlights how much the condo market has struggled compared to the rest of the housing market. We did experience some periods of value loss in the last quarter of 2020 and early in 2021, but the first half data (and my experience in the market) suggests that prices have recovered and leveled out to about the same values we saw in 2019.

The biggest question I have is whether we will sustain these prices or see a slow decline as people adjust to new work arrangements and housing preferences in the wake of COVID. While it’s possible that we could see a delayed price surge due to sustained low interest rates and returns to offices, I think that scenario is unlikely.

This week, we will take a look at Arlington’s condo market in the first half of 2021. Note that the data does not include cooperatives (e.g. River Place) or age-restricted housing (e.g. The Jefferson).

Prices Relatively Flat, Listing Volume and Inventory Up

I think the biggest story in the condo market for Arlington and the D.C. metro area is the historically high number of condos being listed for sale since Q3 2020. There is clearly a flight out of condos by homeowners and investors, and the demand is not high enough to absorb the extra supply, so inventory levels have returned to 2015-2016 levels when we were in the midst of a near zero-growth condo market (in Arlington).

The return to 2015-2016 inventory levels isn’t a bad thing, but the suddenness of that shift was difficult for sellers to manage after we experienced a red-hot condo market from late 2018 (Amazon HQ2 announcement) to early 2020 (pre-pandemic).

Demand Metrics Down, Disaster Avoided

Demand metrics like days on market, percentage of homes selling within a week and the percentage of sold price to the original asking price are all down to 2017-2018 levels (pre-Amazon announcement), and prices are more reflective of what we saw in the first half of 2019.

During the pandemic, there were concerns of a fundamental shift in the condo market that would lead to a significant re-pricing of condo values, but that’s clearly not the case. Sure, it’s tough for condo owners to take a step backward while the single-family/townhouse market surges ahead, but the condo market looks to be recovered and safe at this point.

If you’re interested in seeing last week’s mid-year analysis of the single-family housing market, you can check it out here.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: How has Arlington’s single-family housing market performed in the first half of 2021?

Answer: The news has been full of stories and data about the explosion in real estate prices and intense competition for single-family homes across the country. Arlington has been no exception.

This week, we’ll take a look at some charts and data that highlight what we’ve experienced so far in 2021 for single-family homes (SFH) in Arlington.

Overview: Prices Up, Listing Activity Up, Inventory Down

The year-over-year median price for SFHs increased 8.6% in Q1 and 20.6% in Q2 (remember Q2 2020 had end-to-end strict COVID lockdowns) with both quarters exceeding a median price over $1.1M — the first time that has happened in any quarter in Arlington. If you want to skip 2020 because of COVID, Q1/Q2 median prices in 2021 were up 17.4% and 21.1%, respectively, compared to 2019 median prices.

After back-to-back years of below-average listing volume, the number of SFHs listed for sale in the first half of 2021 exceeded 900 homes for the first time since 2017 and ended up well above the 10-year first half average of approximately 860 homes listed for sale during the first half.

Despite strong listing volume, active inventory hit a 10+ year low due to demand outpacing new supply. We finished Q2 with 1.3 months of supply — about twice as high as Loudoun County, which is struggling tremendously with inventory levels.

Bye-Bye Affordability

Of the six ZIP codes with enough SFH supply to generate reliable data (22206, 22209 and 22213 don’t have enough SFH sales), only one had an average sold price below $1M, compared to four in 2019!

One of my biggest takeaways from the 2021 market so far is just how quickly prices have increased in the least expensive neighborhoods. The two ZIP codes with the lowest average SFH price, 22203 and 22204, increased by 16.8% and 20.7%, respectively, from the first half of 2020, while the four most expensive saw increases ranging from 0.4% to 8.8%.

In 2020, the average home in 22201 (most expensive ZIP code) was 95% more expensive than the average home in 22204 (least expensive ZIP code). In 2021, the gap closed quickly with the average 22201 home being 62% more expensive than the 22204 average.

Price Distributions Skew High

While the largest volume of sales still falls in a sub-$1M range, the price distribution in Arlington skews high. Despite the high average/median prices, Arlington doesn’t have much of an ultra high-end market, with just three sales over $3M and just two SFH sales over $3.5M in the last five years.

Prior to this year, the percentage of sales under $800K was always greater than the percentage of sales over $1.5M. In the first half of 2021, not only were there a higher percentage of sales over $1.5M but the number of sales over $1.5M nearly doubled the number of sales under $800K!

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Does it matter which lender/mortgage company I choose when I purchase a home?

Answer: Choosing a good lender is one of the most important decisions you make during the home buying process. In a competitive market like we’re in now, choosing the right lender goes beyond a low interest rate and access to good loan products; it can be the difference between having your offer accepted or passed over.

Stronger Offers

Better Pre-Approval: When I review offers on behalf of a seller, I put a lot of value in the quality of the lender/bank who wrote the pre-approval letter for the buyer. A lender who has taken the time to review credit and financial documents, and to get a thorough understanding of the buyer, means the risk of financing falling through is much lower than with lenders who generate pre-approvals based on a short form with inputs from the buyer, without verification.

Most agents representing a seller will contact the lender on the pre-approval letter to ensure they are responsive, personally familiar with the buyer’s financial qualifications and confident in closing based on the contract terms (price, settlement timeline, etc.). Having a lender on your side who will answer the phone and understands the importance of this communication can make all the difference in a competitive market.

Close Faster: Online lenders, larger banks and credit unions often have difficulty closing in less than 35 to 45 days, but a good lender can often settle in less than three weeks. If you find yourself competing for a property, working with a lender who can close quickly will significantly increase the probability of your offer being chosen compared to a lender who needs at least five weeks.

Don’t Miss Settlement

Good lenders do not miss the settlement date. Their reputation and business rely on it. If you miss the contracted settlement date, you’re (usually) in default and expose yourself to risks including losing the Earnest Money Deposit, incurring the seller’s carrying costs or having the contract voided by the seller.

A good question to ask your lender is where their staff works. There are quite a few people involved in getting your loan approved including the loan officer, processor and underwriters. Lenders with a history of missing settlement deadlines often have staff working in different locations that don’t regularly work together. If your lender works in the same physical office as those people, that’s a good indication that they can handle issues efficiently and have a higher probability of meeting the settlement date.

Don’t Get Duped (Interest Rate vs. APR)

Be careful when you’re comparing interest rates, especially online rates. Make sure you’re comparing the Annual Percentage Rate (APR), not the interest rate. Many lenders advertise lower rates by including points (you pay cash upfront for a lower rate) or they charge higher fees. The APR is a measure of the total cost of the loan, including points, fees, and interest rate and allows for an apples-to-apples comparison.

Additionally, the advertised rates are often based on the ideal borrower profile and loan amounts. A true rate quote requires the lender to have your credit information, debts, income, purchase price and down payment. Even with that information, I’ve seen lenders quote low rates to capture a buyer’s attention and then increase the rate/fees once it comes time to lock everything in. Be careful and ask questions.

Reliable Pre-Approvals

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This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!

Question: Can you explain what mortgage insurance is and if there’s any way to get rid of it?

Answer:

What is Mortgage Insurance?

Mortgage insurance is an additional monthly or upfront fee added to a mortgage, usually set at .1% to 1% of the loan amount, offered by either the government or private insurance companies to enable lenders to offer down payments below 20%. Mortgage insurance covers lenders for losses up to a certain amount if a borrower defaults on their mortgage.

Note: There are some sub-20% down payment products on the market for high-earning, high-credit borrowers that do not require mortgage insurance.

There are two types of mortgage insurance available:

  1. FHA mortgage insurance: FHA is a government program, which requires a down payment of as little as 3.5% of the sales price, and mortgage insurance is required on FHA mortgages, regardless of the amount of down payment.
  2. Conventional mortgage insurance: Conventional mortgages are home loans that are not insured or guaranteed by the government, as in the case of the FHA mortgage example. Many conventional loans are sold to Fannie Mae or Freddie Mac and thus follow these entities’ “conforming” guidelines.

Conventional or private mortgage insurance enables lenders to offer conventional loans with a minimum down payment as low as 3.0% to 5.0%. Most 3.0% down conventional mortgages are restricted to low-to-moderate income borrowers.

How is the Fee Determined?

The cost of mortgage insurance will vary greatly, depending upon several factors:

  • The amount of the down payment
  • The qualifications of the borrower like credit score and debt-to-income ratio
  • Whether the mortgage is an FHA or conventional loan
  • The type of the mortgage such as a 30-year or 15-year loan

Mortgage Insurance Can Be Removed

If you have a conventional loan (not FHA), you can request that your mortgage insurance premium be removed from your payments once your equity reaches or exceeds 20% (loan-to-value/LTV is 80% or less). This can be a result of a natural equity increase through your monthly payments and/or through appreciating home value.

To qualify, you cannot have a late payment in the last two years, and if you are making your case based on a higher market value of your home, the loan servicer will require a new appraisal (cost is usually around $500).

For conventional loans, your mortgage insurance is automatically removed once your LTV reaches 78% (equity reaches 22%) or you reach the midway point in your loan (15 years into a 30-year loan). Prior to hitting a 78% LTV, it is up to your loan servicer to decide whether to approve the removal of your mortgage insurance payment.

Key Takeaway

Given how much townhomes and single-family homes have appreciated recently, if you have mortgage insurance and have not made a late payment in the last two years, it’s a good idea to contact your loan servicer about having your home reappraised to see if you now have 22% or more equity and qualify for automatic removal or have 20% to 21.99% equity and can apply for early removal.

If you’d like to discuss buying, selling, investing or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. 703)-390-9460.

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